Page |1

SUMMER INTERSHIP PROJECT

ON
WORKING CAPITAL IN INTERNATIONAL BUSINESS
AT
CADILA PHARMACEUTICAL LIMITED

SUBMITTED BY:
.
SUBMITTED TO:

UNIVERSITY OF PUNE
GUIDED BY:
PROF:
PUNE 411001
2014

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Acknowledgement
Words are indeed indebted to convey our deep sense of gratitude to all
those who have helped us in completing this summer project to the best of our
ability.

Being a part of this project has certainly been a unique and a very

productive experience on our part.

I would like to thanks my internal guide and project coordinator,

..whose guidance in my project work which was of such a great
learning experience. He acquainted me with practical aspects project financing and
working capital.

I would like to thanks to our Director Prof. and also to HOD

.., and all the faculties of ..college

for their

valuable guidance, keen interest, co-operation, inspiration & of course moral support for
completing my project.

Name:
Sign:

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PREFACE

This project work is an integral part of the TYBBA program. The main objective of
the project is to work in the organization and gain the valuable knowledge of
management skills that will be useful in the future career building.
The purpose is to study how an organization functions and how to apply our
academic knowledge in the corporate life. As a practical point of view Cedila
Pharmaceutical Limited, which is one of the leading pharmaceutical companies in India,
has provided us such a great opportunity of project in their organization. It helps us to get
better understanding and working of various theories of financial management.

We have prepared the project report, which contains following parts:

1) To study Working capital Assessment & Maximum Permissible Bank Finance.

2) To study the various forms of CMA ( Credit Monetary Assessment ) data for the
purpose of availing Bank Finance prescribed by Reserve Bank of India.
3) To find out the ratio related the CMA.
We learned a lot from this training about the corporate life, which will be useful
to us in future. But as there is one limitation that we cant disclose all the financial and
other information about Cedila Pharmaceutical as per the company policy, we have not
shown all the data in the project report

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DECLARATION

I, Mr. , a student of Allana Institute of Management

Sciences, Pune-1 here by solemnly declare that the project titled, WORKING CAPITAL IN
INTERNATIONAL BUSINESS with CADILA PHARMACEUTICAL LTD. My original work
as all the information, facts and figures procedures in this report are based on my own experience
and study during my summer training.
Further I also declare that I have tried to my best to complete this project with almost sincerity,
honesty and accuracy. Even then if any mistake or error has found in this, I shall most humbly
request to reader to inform those error. Any suggestions regarding this project will be most
welcome.

Date: Place: - Pune

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Table of content

Page.
Serial no.
1
2

Particulars
Executive Summery
Introduction

Company Profile

Literature Review

Research Methodology

Data Analysis and Interpretation

Finding

10

Limitation

11

Suggestions

12

Conclusion

13

Bibliography
Annexure

No.
6
9
16
24
54
58
69
74
76
78
80-87

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EXECUTIVE SUMMARY

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EXECUTIVE SUMMARIES

This project is focused on the study of working capital of International Business

of Cadila Pharmaceutical Ltd.
Working capital management involves not only the managing the different
components of current assets but also managing the current liabilities or to be more
precise financially the current assets.
Working capital can be viewed as the amount of capital required for the smooth
and uninterrupted functioning of the normal business operation of the company ranging
from the procurement of raw materials, converting the some in to finished products for
the sale of finished goods.
Cadila Pharmaceuticals Ltd is Gujarat Company and its dealing with manufacturing and
supply of all type of medicines.
This training provides golden opportunity to us for getting a perfect knowledge
and experience.
We have made our best efforts to get knowledge and experience during this
training.
We collected necessary information and the present all the necessary information
to understand the working of the organization.

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Objective of Project Report

1) To study Working capital requiremnts& Maximum Permissible Bank Finance.

2) To study the various forms of CMA ( Credit Monetary Assessment ) data for the
purpose of availing Bank Finance prescribed by Reserve Bank of India.
3) To find out the ratio related the CMA.

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INTRODUCTION TO CADILA
PHARMACEUTICALS

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Cadila Pharmaceuticals Ltd. is one of the largest privately held pharmaceutical

companies in India, headquartered at Ahmedabad, in the state of Gujarat. Over the last
five decades, it has been developing and manufacturing pharmaceutical products and
selling and distributing these in over 50 countries around the world. An integrated
healthcare solutions provider with pharmaceutical product basket, it caters to over 50
therapeutic areas that include cardiovascular, gastrointestinal, analgesics, haematinics,
anti-infective and antibiotics, respiratory agents, ant diabetics and immunological. The
company focuses on providing high quality, appropriately priced products to its
customers and supports all these with dedicated customer service. Cadila Pharmaceuticals
has a multicultural, multilingual and multinational workforce of more than four thousand
employees including over two hundred people outside India in forty-nine countries of
Africa, CIS, Japan and USA.

The company has one of the best Research and Development (R&D) setups in
India, manned by more than three hundred and fifty scientists and engineers from various
disciplines including biology, pharmacology, clinical research, chemistry, toxicology,
photochemistry and different disciplines of engineering. The company also participates in
Public-Private partnerships for developing diagnostic, preventive and curative
pharmaceutical and diagnostic products.

A responsible corporate citizen conscious of its duty towards various sections of

the society; CADILA Pharmaceuticals nurtures young talents; runs an ultra-modern
charitable hospital in a remote area with facilities like Telemedicine in association with
Apollo Ahmedabad; works closely with NGOs by way of assistance and support for midday meal programmers , among other initiatives.

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Vision

"Our vision is to be a leading pharmaceutical company in India and to become a

significant global player by providing high quality, affordable and innovative solutions in
medicine and treatment."

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Mission

"We will discover, develop and successfully market pharmaceutical products to

prevent, diagnose, alleviate and cure diseases.

We shall provide total customer satisfaction and achieve leadership in chosen

markets, products and services across the globe, through excellence in technology, based
on world-class research and development.

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International Business
In line with our vision to be significant global player by 2010 A.D., Cadila Pharmaceuticals
is fast emerging as a true Indian multinational.
As part of our strategy, we have wholly owned subsidiaries, joint ventures, strategic
alliances, contract manufacturing, own marketing offices in 4 countries and have significant
presence in over 46 countries across the globe. Our business revolves around the exports of
formulations, bulk actives, hospital disposables, veterinary formulations and pharmaceutical
machinery manufacturing.
Besides a significant presence in the Americas, CIS Countries, Africa, Central and SouthEast Asia, Oceanic Countries, Japan, Middle East and Europe, the company has offices in
USA, Japan, Kenya, Nigeria, Russia, Kazakhstan and Ukraine. The International SBU plans
to

expand

operations

to

more

than

100

countries

The focus is on building brands in the following therapeutic segments:

Anti-Infective

Gastrointestinal

Analgesic/Anti-inflammatory

Cardiovascular

Respiratory

Ophthalmology

Bio-technical Products

by

2010.

P a g e | 14

Alliances exist with regional majors in the form of International marketing, joint ventures
and contract manufacturing. More such collaborations are underway to expand supply chain
network and facilitate extensive market coverage. An ultra-modern formulations
manufacturing facility conforming to the exacting standards of WHO-GMP, USFDA,
MHRA-UK, MCC-South Africa, TGA-Australia, ANVISA- Brazil, EU GMP, ISO 9002 and
Japanese GMP is a value-addition to the International SBU in flexing its muscles in the
overseas arena. This SBU has been honoured with the Chemexcil Award, 2000-01 and Niryat
Shree Award from FIEO, for the year 2001-02.
With its basic philosophy of giving the best to the world at an affordable price, Cadila
Pharmaceuticals continues to make a difference in the lives of millions, while carving a niche
for Indian Pharmaceuticals exports, globally.

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Considerations

The major influence on the exchange rate is the supply and demand of money.
When companies buy services and products from other countries, they must first
exchange their national currency for the currency of the country providing the product or
service. The price of that money is, effectively, the exchange rate. Therefore, when the
demand for the money of a certain country goes up, its price generally rises accordingly.

Effects

When the demand and price of one currency rises, it often causes a depreciation in
another currency. For example, if the United States begins to buy a large amount of
products from Japan, the demand increases and so does the price of yen. At the same
time, more U.S. dollars are put in the international market to buy the yen that allow the
purchase of the products. This rise in the supply of U.S. dollars causes them to drop in
price, or to depreciate.

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COMPANY PROFILE

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JOURNEY OF THOUSAND MILES BEGINS WITH ONE FOOTSTEP

On 13 th March, 1950 Mr. Ramanbhai B. Patel, Mr. Indravadan A. Modi& Mr.

Ramanbhai Patel had started small Pharma unit, they named itCadila laboratories ltd.
With initial investment of Rs.25000.Mr.Ramanbhai Patel left Cadila laboratories and
started new company in 1965. They have started production in their own premises at
Azad society, in Ahmadabad.

Their first products were Gripe water and Cadimelt. In 1965 they started
factory at Ghodasar in Ahmedabad. At Ghodasar factory production of full
pharmaceutical range was started. After growth of business, they started various
departments like Distribution, Marketing, Human Resources, Research & Development,
and Animal House etc.
Mr. I. A. Modi and R.B. Patel launched many unique Products in different
categories and company became known in all over India. They had launched Oxalgin
(Anti-Inflammatory), which sold of Rs.1 Crores in one day. It was pick time for Cadila

P a g e | 18

They have started Export Oriented Unit at Kandla. That unit was inaugurated
by Prime Minister Shrimati Indira Gandhi and was visited by many central ministers.

In 1992 sale of Cadila grew to 3 crores. So to have smooth administration and

distribution in all part of India, it was decided to appoint C&F Agents (Carrying and
Forwarding) in all states of country. As a result company made sizable increase in sales
with smooth availability of products throughout India.

By now, Mr. Pankaj R. Patel & Dr. Rajiv I. Modi had taken charge of company. They had
made company known internationally.
Cadila was known for its unique and new products. R&D was the strength of company.
At that time Mr. T. P. Gandhi and Mr. Ambubhai Patel was handling R&D department.

Mr. Adeshra, Commissioner of FDCA (food &drug Control administration) has

started his career in Cadila R&D department. CADILA was developed as self made
organization.

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Any requirement raised by factory were produced by company itself i.e. Machinery,
Corrugated Boxes, Printing etc. Cadila has developed Machinery manufacturing unit
CADMAC. CADILA has developed corrugated box manufacturing unit CORPAC.
Cadila has developed printing press PRINTORIUM. Mostly all units which they have
developed have won national awards and Export Award.
By the early 90s Cadila was ranked as 3 rd largest pharmaceuticals company in
India, with a turnover of Rs.4000 million. The decade also marked the beginning of a
new economic framework and a shift in the government policies. To thrive in a changing
business environment, the group decided to restructure its operations in 1995.
The restructuring package was aimed at allowing the individual promoting
families namely the Patel family and the Modi family to pursue their independent
business philosophies i.e. Cadila healthcare ltd. is lead by Patel family and Cadila
Pharmaceuticals Ltd is lead by Modi family.
The present issue pertaining to Cadila Pharmaceuticals Ltd. provided by Modi family. At
present Dr. Rajiv Modi is Managing Director of Cadila Pharmaceuticals Ltd.
The company was incorporated as Cadila Pharmaceuticals Pvt. Ltd. on 15 th February
1995 under the companies act, 1956 and subsequently the company was converted into a
public company and then after renamed as Cadila Pharmaceuticals Ltd. effective from
July 7, 1996. Cadila Pharmaceuticals Ltd. came into existence with a focus on total
healthcare solutions.
Cadila Pharmaceuticals- headed by dr. Rajiv modi&ZydusCadila headed by Mr.
Pankajbhai Patel, total sales of both the units reached more than 500 Crores in 1995.

They launched Anti Ulcerent drug rabeprazole with the brand name of RABILOC, which
was launched 1st time in India and was taken patent. For many years it was unique
product of Cadila. Cadila Pharmaceuticals main products were:

P a g e | 20

Hem up- hemoglobin Tonic.

Catenol Anti Hyper Tension.
Envas
Aciloc

They have launched human rabies vaccine VERORAB, with collaboration with
French company.

P a g e | 21

Our Operations
Existing
CIS Russia, Ukraine, Latvia, Belarus, Lithuania, Kazakhstan, Georgia, Armenia,
Moldova, Uzbekistan
Africa SA, Kenya, Nigeria, Mauritius, Zimbabwe, Zambia, RDC, Cameroon,
IVC, Tanzania, Uganda, Ethiopia, Sudan, Mozambique and Franco for countries.
South-East Asia/Pacific Sri Lanka, Thailand, Vietnam, Myanmar, Maldives,
Philippines, Macau, Singapore, Maldives, Fiji, Papua New-Guinea, New Zealand
Australia, Taiwan.

Middle East-Oman, Yemen, Bahrain, Iran, Iraq, Egypt, Syria.

North America USA, Canada.
Europe Denmark, Hungary, France Bulgaria.
Latin America Brazil, West Indies, Dominican Republic, Mexico.
Far East Japan, South Korea.

Future Plans

P a g e | 22

Saudi Arabia
Angola
Estonia
Czech Republic
Romania
Slovakia
Slovenia
Bosnia
Croatia
Yugoslavia

Albania
Chile
Venezuela
Columbia
Paraguay
Hong Kong
China
Jordan
Lebanon

Group Companies
1.
2.
3.
4.
5.
6.

Casil Industries Limited (CIL)

Casil Health Products Limited (CHPL)
Veterinary Extending care towards animals
Green Channel Travel Services
Green Channel America
Karnavati Engineering Ltd.

1. KarnavatiAmeric
2. CPL Inc. USA

CADILA PHARMACEUITICALS

DHOLKA

ANKLESWAR

P a g e | 23

CHEMICAL

FROMULATION

CHEMICAL

DOMESTIC

INTERNATIONAL

P a g e | 24

Literature Review

P a g e | 25

THE IMPORTANCE OF WORKING CAPITAL FINANCE

Three Meanings Of Working Capital
The term working capital has several meanings in business and economic development
finance. In accounting and financial statement analysis, work-ing capital is defined as the
firms short-term or current assets and current liabilities. Net working capital represents
the excess of current assets over current liabilities and is an indicator of the firms ability
to meet its short-term financial obligations (Brealey& Myers, 2002). From a financing
perspective, working capital refers to the firms investment in two types of assets. In one
instance, working capital means a businesss investment in short-term assets needed to
operate over a normal business cycle. This meaning corresponds to the required
investment in cash, accounts receivable, inventory, and other items listed as current assets
on the firms balance sheet. In this context, working capital financing concerns how a
firm finances its current assets. A second broader meaning of working capital is the
companys overall non fixed asset investments. Businesses often need to finance
activities that do not involve assets measured on the balance sheet. For example, a firm
may need funds to redesign its products or formulate a new marketing strategy, activities
that require funds to hire personnel rather than acquiring accounting assets. When the
returns for these soft costs investments are not immediate but rather are reaped over
time through increased sales or profits, then the company needs to finance them. Thus,
working capital can represent a broader view of a firms capital needs that includes
bothcurrent assets and other non fixed asset investments related to its operations.

P a g e | 26

Business Uses of Working Capital

Just as working capital has several meanings, firms use it in many ways. Most
fundamentally, working capital investment is the lifeblood of a company. Without it, a
firm cannot stay in business. Thus, the first, and most critical, use of working capital is
providing the ongoing investment in short-term assets that a company needs to operate. A
business requires a minimum cash balance to meet basic day-to-day expenses and to
provide a reserve for unexpected costs. It also needs working capital for prepaid business
costs, such as licenses, insurance policies, or security deposits. Furthermore, all
businesses invest in some amount of inventory, from a law firms stock of office supplies
to the large inventories needed by retail and wholesale enterprises. Without some amount
of working capital finance, businesses could not open and operate. A second purpose of
working capital is addressing seasonal or cyclical financing needs. Here, working capital
finance supports the buildup of short-term assets needed to generate revenue, but which
come before the receipt of cash. For example, a toy manufacturer must produce and ship
its products for the holiday shopping season several months before it receives cash
payment from stores. Since most businesses do not receive prepayment for goods and
services, they need to finance these purchase, production, sales, and collection costs prior
to receiving payment from customers. Figure 5.1 illustrates this short-term cash flow and
financing cycle.
Another way to view this function of working capital is providing liquidity. Adequate
and appropriate working capital financing ensures that a firm has sufficient cash flow to
pay its bills as it awaits the full collection of revenue. When working capital is not
sufficiently or appropriately financed, a firm can run out of cash and face bankruptcy.
A profitable firm with competitive goods or services can still be forced into
bankruptcy if it has not adequately financed its working capital needs and runs out of
cash.

P a g e | 27

Working capital is also needed to sustain a firms growth. As a business grows, it

needs larger investments in inventory, accounts receivable, personnel, and other items to
realize increased sales. New facilities and equipment are not the only assets required for
growth; firms also must finance the working capital needed to support sales growth. A
final use of working capital is to undertake activities to improve business operations and
remain competitive, such as product development, ongoing product and process
improvements, and cultivating new markets. With firms facing heightened competition,
these improvements often need to be integrated into operations on a continuous basis.
Consequently, they are more likely to be incurred as small repeated costs than as large
infrequent investments. This is especially true for small firms that cannot afford the cost
and risks of large fixed investments in research and development projects or new
facilities. Ongoing investments in product and process improvement and market
expansion, therefore, often must be addressed through working capital financing.

P a g e | 28

AR converted
to cash
CASH

COLLECT
ACCOUNTS
RECIEVABLE

DELIVER
GOODS OR
SERVICES

Goods or Services
converted to Accounts
Receivable

SALES
ORDER

PRODUCE
GOODS OR
SERVICES

Cash
converted to
prepaid
expenses and
inventory

P a g e | 29

Cash Flow and the Working Capital Cycle

Permanent and Cyclical Working Capital

Firms need both a long-term (or permanent) investment in working capital and a shortterm or cyclical one. The permanent working capital investment provides an ongoing
positive net working capital position, that is, a level of current assets that exceeds current
liabilities. This allows the firm to operate with a comfortable financial margin since shortterm assets exceed short-term obligations and minimizes the risk of being unable to pay
its employees, vendors, lenders, or the government (for taxes). To have positive net
working capital, a company must finance part of its working capital on a long-term basis.
Since total assets equal total liabilities and owners equity, when current assets exceed
current liabilities, this excess is financed by the long-term debt or equities (Brealey&
Myers, 2002). Figure 5.2 demonstrates this point graphically. For current assets (area CA)
to be greater than current liability (area CL), long-term debt and equity must finance part
of area CA. Beyond this permanent working capital investment, firms need seasonal or
cyclical working capital. Few firms have steady sales and production through-out the
year. Since the demand for goods and services varies over the course of a year, firms need
to finance both inventories and other costs to prepare for their peak sales period and
accounts receivable until cash is collected. Cyclical working capital is best financed by
short-term debt since the seasonal buildup of assets to address seasonal demand will be
reduced and converted to cash to repay borrowed funds within a short predictable period.
By match-ing the term of liabilities to the term of the underlying assets, short-term
financing helps a firm manage inflation and other financial risks.

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Short-term financing is also preferable since it is usually easier to obtain and priced
lower than long-term debt.
Working capital financing is a key financing need and challenge for small firms. As
discussed in Chapter 2, small businesses have less access to long-term sources of capital
than large businesses, including limited access to equity capital markets and fewer
sources of long-term debt. Thus, many small firms are heavily dependent on short-term
debt, much of which is tied to working capital. 1 However, limited equity and reliance on
short-term debt increases the demand on a firms cash flow, reduces liquidity, and
increases financial leverage all of which heighten the financial risks of extending credit.
Consequently, small firms may have trouble raising short-term debt while at the same
time facing obstacles to securing the longer-term debt necessary to improve their
financial position and liquidity, and lessen their credit risk.

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ASSETS

LIABILITIES
OWNERS

CAPITAL

CURRENT ASSETS
(CA)

CURRENT
LIABILITIES(CL)

LONG TERM ASSETS

LONG TERM
LIABILITIESAND
OWNERS EQUITY

Share of Current
Assets financed
with long term
capital

AND

P a g e | 32

POSITIVE NET WORKING CAPITAL REQUIRES LONG TERM

FINANCING

Forms of Working Capital Financing

Working capital financing comes in many forms, each of which has unique terms and
offers certain advantages and disadvantages to the borrower. This section introduces the
five major forms of debt used to finance working cap-ital and discusses the relative
advantages of each one.2 The purpose of this information is to provide insight into the
different ways in which debt can be structured and prepare practitioners to choose and
structure a debt tool best suited to a firms financial situation and needs. Table 5.1
summarizes the major features of the five working debt tools described below.

Line of Credit
A line of credit is an open-ended loan with a borrowing limit that the business can draw
against or repay at any time during the loan period. This arrangement allows a company
flexibility to borrow funds when the need arises for the exact amount required. Interest is
paid only on the amount borrowed, typically on a monthly basis. A line of credit can be
either unsecured, if no specific collateral is pledged for repayment, or secured by specific
assets such as accounts receivable or inventory. The standard term for a line of credit is 1
year with renewal subject to the lenders annual review and approval. Since a line of
credit is designed to address cyclical working capital needs and not to finance long-term
assets, lenders usually require full repayment of the line of credit during the annual loan
period and prior to its renewal.

P a g e | 33

This repayment is sometimes referred to as the annual cleanup.

Two other costs, beyond interest payments, are associated with borrowing through a line
of credit. Lenders require a fee for providing the line of credit, based on the lines credit
limit, which is paid whether or not the firm uses the line. This fee, usually in the range of
25 to 100 basis points, covers the banks costs for underwriting and setting up the loan
account in the event that a firm does not use the line and the bank earns no interest
income. A second cost is the requirement for a borrower to maintain a compensating
balance account with the bank. Under this arrangement, a borrower must have a deposit
account with a minimum balance equal to a percentage of the line of credit, perhaps 10%
to 20%. If a firm normally maintains this balance in its cash accounts, then no additional
costs are imposed by this requirement. However, when a firm must increase its bank
deposits to meet the compensating balance requirement, then it is incurring an additional
cost. In effect, the compensating balance reduces the businesss net loan proceeds and
increases its effective interest rate. Consider a line of credit for $1 million at a 10%
interest rate with a 20% compensating balance requirement. When the company fully
draws on the line of credit, it will have borrowed $1 million but must leave $200,000 on
deposit with the lender, resulting in net loan proceeds of $800,000. However, it pays
interest on the full $1 million drawn. Thus, the effective annual interest rate is 12.5%
rather than 10% (one years interest is $100,000 or 12.5% of the $800,000 in net
proceeds). Like most loans, the lending terms for a line of credit include financial
covenants or minimal financial standards that the borrower must meet. Typical financial
covenants include a minimum current ratio, a mini-mum net worth, and a maximum debtto-equity ratio.
The advantages of a line of credit are twofold. First, it allows a company to minimize
the principal borrowed and the resulting interest payments. Second, it is simpler to
establish and entails fewer transaction and legal costs, particularly when it is unsecured.

P a g e | 34

Account Receivable
Account receivables are generated when a firm offers credit to its customers. The
first thing that need to be addressed when establishing a credit policy is to set the
standards by which a firm is judged in determining whether or not credit will be
extended. There is whats Known as the 5 Cs of credit:
1. Character - the willingness of the borrower to repay the obligation
2. Capital the capability of the borrower to earn the money to repay the
obligation
3. Capital sufficient assets available to support operations (as opposed to a
firm that is undercapitalized). Sometime capital is interpreted to mean
equity capital; i.e., to make sure the owner of the firms have sufficient
money at stake to give them proper incentive to repay the loan and let the
company go bankrupt.
4. Collateral assets to support the loan which can be liquidated if default
occurs
5. Conditions current and future anticipated conditions of the firm and the
industry
These cost include

The time value of money tied up in account receivable

Bad debts that occur
Credit checks ( to minimize bad debts )
Collection costs
Discounts for early payment ( reduces revenues )

P a g e | 35

Competitors will respond very quickly to a change in price. How many times have
we seen the claims that We will meet or beat any advertised price? A change in credit
policy, on the other hand, is a more subtle means of competing for customers and one that
the competition will not necessarily respond to. In fact, many firms base their business on
easy credit. How many times have we seen the advertisements where they tell us Good
credit? Bad credit? No credit? We dont care!Of course, these firms will have larger bad
debt expenses and larger financing costs, etc. Obviously, they will also need to have
higher prices (higher gross profit margins) in order to cover these costs.

Inventories
Inventories (raw materials, work-in-process, finished goods) make up a large
portion of most firms current assets, and for many, total assets. As such, the extent to
which a firm efficiently managers its inventories can have a large influence on its
profitability. Thus, keeping abreast of inventory policy is critical to the profitability (and
value) of the firm.

Several factors influence the amount of inventory that a firm maintains. The most
important of these include.

P a g e | 36

Short-term Financing Trade Credit

The major source of short-term financing for firm is that of trade credit. While it
is an account payable on our balance sheet, it is an account receivable on the balance
sheet of our supplier.

The term of credit can vary quite a bit:

1. Cash on Delivery ( i.e., no credit )
2. Net amount due within a certain period of time
3. Net amount with a discount if paid within a certain period of time, net amount
within another period.

Commercial Banks
The second major source of short-term financing for firms is commercial banks. A
firm wants to establish a close relationship with its bank and obtain a line of credit. In
order to get a credit line, you will want to show them your income statements, balance
sheet, financial ratios, etc. The bank will then allow a certain amount of credit with a set
rate of interest (usually prime plus).

Types of Loans

P a g e | 37

Loans come in a variety of shapes. A simple loan requires that the firm maintain a
non- interest-bearing account at the bank. While compensating balances are not used as
much as they have been in the past, they are still encountered frequently.
The true cost of debt of any loan is the internal rate of return between what you
receive and what you have to pay back. Suppose we use our calculators and determine the
IRR of this interest add-on loan. We determine that the IRR is 1.2%. But remember that
he is 1.2% per month. Using simple interest, 1.2%*12 = 14.4% annual rate of interest.

Security for Bank Loans

Banks like some sort of collateral for loans to ensure repayment of the loan, at
least in part. The preferred collateral for bank loans is accounts receivable. The reason, of
course, is that collecting money is what banks do. Typically, a bank will loan up to 7580% of the receivables that are not over 60 days. There are two ways to obtain financing
with receivables:

Securities Loans
A borrower can pledge their inventories of securities of another company (bonds,
notes payable) as collateral for a loan as well. Thus, if you hold a note payable from a
creditworthy firm, many lenders will loan money against it. (This is similar, in a sense, to
what happens with a margin purchase.)

In short, if a firm has assets of virtually any kind, it can use them as collateral for
short-term loans to meet its short-term cash needs.

Tandon Committee

P a g e | 38

Like many other activities of the banks, method and quantum of short-term finance
that can be granted to a corporate was mandated by the Reserve Bank of India till 1994.
This control was exercised on the lines suggested by the recommendations of a study
group headed by ShriPrakashTandon.

The study group headed by ShriPrakashTandon, the then Chairman of Punjab

National Bank, was constituted by the RBI in July 1974 with eminent personalities drawn
from leading banks, financial institutions and a wide cross-section of the Industry with a
view to study the entire gamut of Bank's finance for working capital and suggest ways for
optimum utilization of Bank credit. This was the first elaborate attempt by the central
bank to organize the Bank credit. The report of this group is widely known as Tandon
Committee report.Most banks in India even today continue to look at the needs of the
corporate in the light of methodology recommended by the Group.

As per the recommendations of Tandon Committee, the corporate should be

discouraged from accumulating too much of stocks of current assets and should move
towards very lean inventories and receivable levels. The committee even suggested the
maximum levels of Raw Material, Stock-in-process and Finished Goods which a
corporate operating in an industry should be allowed to accumulate these levels were
termed as inventory and receivable norms.

First Method of Lending:

P a g e | 39

Banks can work out the working capital gap, i.e. total current assets less current
liabilities other than bank borrowings (called Maximum Permissible Bank Finance or
MPBF) and finance a maximum of 75 per cent of the gap; the balance to come out of
long-term funds, i.e., owned funds and term borrowings. This approach was considered
suitable only for very small borrowers i.e. where the requirements of credit were less than
Rs.10 lacks.

Second Method of Lending:

Under this method, it was thought that the borrower should provide for a
minimum of 25% of total current assets out of long-term funds i.e., owned funds plus
term borrowings. A certain level of credit for purchases and other current liabilities will
be available to fund the buildup of current assets and the bank will provide the balance
(MPBF). Consequently, total current liabilities inclusive of bank borrowings could not
exceed 75% of current assets. RBI stipulated that the working capital needs of all
borrowers enjoying fund based credit facilities of more than Rs. 10 lacks should be
appraised (calculated) under this method.

Third Method of Lending:

P a g e | 40

Under this method, the borrower's contribution from long term funds will be to
the extent of the entire CORE CURRENT ASSETS, which has been defined by the Study
Group as representing the absolute minimum level of raw materials, process stock,
finished goods and stores which are in the pipeline to ensure continuity of production and
a minimum of 25% of the balance current assets should be financed out of the long term
funds plus term borrowings.

MPBF Method

P a g e | 41

(Tendons II method of lending)

Excess borrowing (short fall in NWC) shall be ensured by additional funds to be brought
in by the applicant or by additional bank finance over MPBF.

Important Aspects of MPBF Method

Production/Sales estimates
Profitability estimates
Inventory/receivables norms
Build up of Net Working Capital

P a g e | 42

Credit Monetary Assessment

What is the meaning of credit monitoring assessment?
It is nothing but the bank financing for working capital.
It is earlier known as credit Authorization Scheme.
RBI prescribed certain form to be filled for applying that is called as CMA Data
Base.
Calculation is done according to Tendon Committee.
CMA Data is a useful tool, consisting of financials of past two years, estimates of
current year and projections of next year of a company seeking debt, generally insisted by
bank to assess the CMA data is a detailed analysis of the working of any company. To run
a business smoothly business strategy required & to get live financial strategy is required.
So, They credit a financial strategy plan to give it live that is nothing but CMA.
This is required to be submitted by the company who has to take more than Rupee
One crore of working capital loan from any bank. This is consisting of six parts
commonly known as six forms details are as under:-

Form-1 - Assessment of working capital required

Form-2 -Operating statement of the company.
From-3 -Analysis of balance sheet.
From-4 - Comparative statement of current asset and current liability.
From-5 - Computation of Flexible Bank Finance.
From-6 - Fund flow analysis.

P a g e | 43

Working Capital Assessment

Any enterprise whether industrial, trading or other acquires two types of assets to
run its business as has already been emphasised time and again. It requires fixed assets
which are necessary for carrying on the production/business such as land and buildings,
plant and machinery, furniture and fixtures etc. For a going concern these assets are of
permanent nature and are not to be sold. The other type of assets of assets required for day
to day working of a unit are known as current assets which are floating in nature and keep
changing during the course of business.

The total current assets with the firm may be taken as gross working capital
whereas the net working capital with the unit may be calculated as under:

Net Working Capital = Current Assets - Current Liabilities

(NWC)

(GWC)

( Including bank borrowings )

This net working capital is also sometimes referred to as liquid surplus with the
firm and has been margin available for working capital requirement of the unit.
The current assets in the example given in the earlier paragraph are financed
asunder:

Current Assets = Current liabilities + Working capital limits from banks + Margin from
long-term liabilities

P a g e | 44

The assessment of working capital may involve two aspects as under

The level of current assets required to be held by any unit which is adequate for its
day to day functioning, and
The mode of financing of these current assets.

Different forms adopting different techniques is thus in circulation for assessment of

working capital depending upon the size and category of projects as under:
(1) Form for assessment of requirements of SSI units up to credit limits of
Rs.2,00,000/- (including composite loans)
(2) Form for assessment of requirements of SSI units for credit limits of above
Rs.2, 00,000 and up to Rs. 15.00lacks.
(3) Form for assessment of requirements for units with credit limits above
Rs.15.00 lacks and up to Rs. 1.00 crore
(4) From for assessment of requirements for units with credit limits above
Rs.100 crore.
(5) CMA Data form for assessment of requirements for units with credit limits
above Rs. 10.00 lacks or as per the cut off point fixed by individual banks.
(6) Assessment of limits for projects falling under various segments of priority
sector:

Key elements of the working capital assessment include:

Review current working capital requirements based on internal processes impacting
receivables, payables and inventory, as well as external and strategic drivers:
Geographic footprint

P a g e | 45

Product mix, and sales channels

Regulatory and financial covenants
Strength in the value chain
Organizational review of the management of working capital through policies,
processes, systems, people and metrics

Financial Management

The management of the finances of a business / organization in order to achieve

financial objectives taking a commercial business as the most common organizational
structure, the key objectives of financial management of the company is to:
Create wealth for the business
Generate cash, and
Provide an adequate return on investment bearing in mind the risks that the
business is taking and the resources invested.
(1) Financial Planning
Management need to ensure that enough funding is available at the right
time to meet the need of the business. In the short term, funding may be needed
to invest in equipment and stokes, pay employees and fund sales made on credit.
In the medium and long term, funding may be required for signification
additions to the productive capacity of the business or to make acquisitions.

(2)Financial Control
Financial control is a critically important activity to help the business
ensure that the business is meeting its objectives. Financial control addresses
questions such as:
Are assets being used efficiently?
Are the businesses assets secure?
Does management act in the interest of shareholders and in accordance with
business rules?

P a g e | 46

(2) Financial Decision-making

The key aspects of financial decision-making relate to investment, financing and
dividing:
Investment must be financed in some way however there are always financing
alternatives that can be considered. A key financing decision is whether profits
earned by the business should be retained rather than distributed to shareholders
via dividends. If dividends are too high, the business may be starved of reinvest in
growing revenues and profit further.

Business & Marketing Changes

Changing Technology
Globalization
Deregulation: greater competition & growth opportunities
Privatization: increasing efficiency
Customer empowerment
Customization
Heightened competition

Industry convergence
Retail transformation
Disintermediation

Working Capital
Working capital, also known as net working capital, is a financial metric
which represents operating liquidity available to a business. Along with fixed assets such
as plant and equipment, working capital is considered a part of operating capital. It is

P a g e | 47

calculated as current assets minus current liabilities.

The diagram below illustrates the working capital cycle.

The upper portion of the diagram above shows in a simplified from the chain of
event in a manufacturing firm. Each of the boxes in the upper part of the diagram can be
seen as a tank through which funds flow. These tanks, which are concerned with day-today activities, have fund constantly flowing into and out of them.

P a g e | 48

The chain starts with the firm buying raw materials on credit.
In due course this stock will be used in production, work will be carried out on the

stock, and it will become part of the firms work in progress (WIP)
Work will continue on the WIP until it eventually emerges as the finished product
As production progresses, labor costs, and overheads will need to be met
Of course at some stage trade creditors will need to be paid
When the finished good are sold on credit, debtors are increased
They will eventually pay, so that cash will be injected into the firm

Each of the areas stocks (raw materials, work in progress and finished goods), trade
debtors, cash (positive or negative) and trade creditors can be viewed as tanks into and
form which funds flow.

What are Working Capital Sources?

Own funds
Bank Borrowings
Sundry Creditors
Advances from customers
Deposits due in a year
Other current liabilities

TYPES OF WORKING CAPITAL

P a g e | 49

FACTORS DETERMINIG WORKING CAPITAL

1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
17)
18)
19)
20)

Nature of the Industry

Demand of Industry
Cash requirements
Nature of the Business
Manufacturing time
Volume of sales
Terms of purchase and sales
Inventory Turnover
Business Cycle
Current Assets requirement
Production Cycle
Credit control
Inflation or Price level changes
Profit planning and control
Repayment ability
Cash reserves
Operation efficiency
Change in Technology
Firms finance and dividend policy
Attitude towards risk

THE WORKING CAPITAL CYCLE

P a g e | 50

(OPERATING CYCLE)

INTRODUCTION OF WORKING CAPITAL MANAGEMENT

Working capital refers to the firms investment in short-term assets (cash,

marketable securities, accounts receivables, and inventories). Net working capital is the
difference between a firms current assets and its current liabilities. Working capital
management involves administering to both short-term assets and short-term liabilities.
Assets and liabilities must be matched and coordinated in order to keep costs to a
minimum and to control risks. Generally that is growing over time, and then its assets can
be decomposed into three categories fixed assets, permanent current assets and

P a g e | 51

fluctuating current assets.

Fixed assets should be financed long-term, either equity or long-term debt, since the
assets are long-lived and need financing for a long period of time. The current assets can
be broken down into two portions, permanent current assets, and fluctuating current
assets. The permanent current assets represent base level of inventories, receivables, etc.,
that will always be on hand. The fluctuating current assets represent the seasonal buildups that occur, such as inventories before Christmas and receivables after Christmas. The
fluctuating current assets levels should be financed short-term since we dont want to pay
financing charges all year if we only need the money for a four-month period.

Definition of Working Capital Management

Working capital management is concerned with current assets and current liabilities and
their relationship to the rest of the firm. Working capital policies affect the future returns
and risk of the company; consequently, they have an ultimate bearing on shareholder
wealth.

Exchange Rates and Exchange: How Money Affects Trade

INTRODUCTION

P a g e | 52

In June 1998, the U.S. stepped into the foreign currency market, using billions of U.S.
dollars to buy Japanese yen in an attempt to stabilize its value. Mexico faced a currency
crisis in 1994. Argentina faced such a crisis in 2002. Why should we care about currency
values of other nations?
How do currency values affect us, the demand for the products we produce, and the prices
of the products we buy?

P a g e | 53

Research Methodology

P a g e | 54

Research refers to the systemic method consisting of identifying the

problem, a hypothesis, collecting the facts, analyzing the facts and reaching the certain
conclusion either in form of solution towards the concerned problem or for some
theoretical formulation. The study is based on the facts collected by Annual Reports and
Internet.
Research Design:
Here in this project, I have adopted the Descriptive research approach.
Descriptive Research
As the name suggests, descriptive research is concerned with describing market
characteristics and/or marketing mix characteristics. Typically, a descriptive study
specifies the number and size of market segments, the alternative ways in which products
are currently distributed, listing and comparison of the attributes and features of
competitive products, etc.
This type of study can involve the description of the extent of association between
variables. For example, the researcher may observe that there is an association between
the geographical location of consumers and their tendency to consume red meat. Note
that the researcher is able to describe the relationship rather than explain it. Nonetheless
if the relationship between the two is fairly stable this descriptive information may be
sufficient for the purposes of prediction. The researcher may, for example, be able to
predict how fast the per capita consumption of red meat is likely to rise over a given time
period.
The principal difference between exploratory and descriptive research is that, in the case
of the latter, specific research questions have been formulated before the research is
undertaken. When descriptive research is conducted the researcher must already know a
great deal about the research problem, perhaps because of a prior exploratory study, and
is in a position to clearly define what he/she wants to measure and how to do it.

P a g e | 55

Research and Development

Research often refers to basic experimental research; development refers to the
exploitation of discoveries. Research involves the identification of possible chemical
compounds or theoretical mechanisms. In the United States, universities are the main
provider of research level products. In the United States, corporations buy licenses from
universities or hire scientist directly when economically solid research level products
emerge and the development phase of drug delivery is almost entirely managed by private
enterprise. Development is concerned with proof of concept, safety testing, and
determining ideal levels and delivery mechanisms. Development often occurs in phases
that are defined by drug safety regulators in the country of interest.

In a challenging market environment after manufacturing now companies are

eyeing to reduce the development cost where R&D need to justify its existence as an
independent profit center with increased productivity and reduced operational costs. This
can only be achieved through collaboration and trade-offs. Formation of horizontal
collaborative network is challenging because it incorporates the issues of adaptability,
security, cultural difference, varying standards, trust and ownership. Globalization is
pushing R&D to concentrate on global design approach with the design flexibility where
products can be tailored as per different geographic markets.

Spread over more than 1, 05,000 sq. ft. area, Cadila Pharmaceuticals R&D
facilities, recognized by the Department of Science & Technology, Government of India,
are manned by a 150-strong scientists pool.

A centralized Quality Control & Analytical Research Laboratory has been set up to
meet the domestic and international quality standards. The Company has expanded
operations by building further on already existing set-up by investing in new premises, to

P a g e | 56

include modern, state-of-the-art amenities. One of the few companies in the country
carrying out collaborative research, Cadila Pharmaceutical taps the best scientific talent
in the country and collaborations with more than 30 leading Research and Development
centers in India.

P a g e | 57

Data Analysis and

Data Interpretations

P a g e | 58

RATIO ANALYSIS

1. `Working capital ratio

Working capital ratio:
Inventory + Receivable Payable
Net Sales

It indicates relationship between inventory amount of current assets and current

liabilities in the organization. If ratio increases year than it show that the company can
meet its daily expenses and will not suffer from crises.

Inventory
Receivable
Payable

2008-09
8,811
17,763
31,006

2009-10
14,257
19,324
37,259

2010-11
14,211
23,980
31,408

2011-12
18,081
31,174
25,709

2012-13
23,381
40,526
20,177

Interpretation: After year and year organization growth rapidly and as inventory and receivable
increase as payable decrease so organization should not face crises problem.

P a g e | 59

2. CURRENT RATIO
Current ratio also Known as working capital ratio is a measure of general liquidity
and its most widely used to make the analysis of short term financial position or liquidity
of a firm. It is defines as the relation between current assets and current liabilities thus,

Current ratio = Current assets / Current liabilities

Current assets
Current liabilities

2008-09
47,702
20,359

2009-10
60,114
30,406

2010-11
60,114
34,326

2011-12
60,614
56,116

2012-13
60,814
63,682

The two components of ratio are:

1. Current assets
2. Current liabilities
Current assets include cash, marketable securities, bills receivable sundry
debtors, and work in progress. Current liabilities include outstanding expenses, bills
payable, dividend payable etc.

P a g e | 60

Interpretation: Every year current liabilities increasing more than current assets so
current ratio will goes down and organization requires more capital. So organizational to
maintain that balance for avoiding financial problems.

P a g e | 61

3.Working capital turnover ratio

This ratio establishes a relation between net sales and working capital.
The working capital is taken as:
Working capital= current assets current liabilities
Working capital turnover ratio:
Net Sales

Working Capital

Net Sales
Working capital

2008-09
62,002
30,308

2009-10
70,279
30,035

2010-11
94,117
29479

2011-12
1,22,202
32500

2012-13
1,58,863
39954

Objectives:
The objective of working capital turnover ratio is to indicate the velocity of the
utilization of net working capital. This ratio indicates the number of time the working
capital is turned over in the course of a year.

P a g e | 62

Interpretation: Most of organization wants to get growth as above condition because it

sells more in minimum capital investment.

P a g e | 63

4. Fixed assets turnover ratio

This ratio establishes a relation between net sales and fixed assets.
Objective:
The Objective of computing this ratio is to determine the efficiency with which
the fixed assets are utilized.
Fixed assets turnover ratio:
Net Sales
Net total fixed assets

Net Sales
Net total assets

2008-09
62,002
42,341

2009-10
70,279
53,105

2010-11
94,117
50719

2011-12
1,22,202
48834

2012-13
1,58,863
46649

The formula is useful in analyzing growth companies to see if they are growing
sale in proportion to their assets bases. The fixed assets turnover ratio really has little
meaning except when it is put in the context of industrial averages, and consideration is
made whether new capital expenditures recently undertaken were such that they could
skew the ratio.

P a g e | 64

Interpretation: This ratio helps to know i.e. growing sells ,according to its assets(fixed
assets).In above graph net sales increasing but not fixed assets.

P a g e | 65

5, Gross Profit Ratio

This ratio measures the relationship between gross profit and net sales.
Objectives:
It is calculated to know:
1. Whether the business is in a position to meet operating expenses or not
2. How much the share holders can get after meeting such expenses?
Gross profit ratio:
Gross profit * 100
Net Sales

Gross profit
Net Sales

2008-09
19429
62,002

2009-10
23422
70,279

2010-11
24116
94,117

2011-12
33768
1,22,202

2012-13
44878
1,58,863

Gross Profit Ratio provides guidelines to the concern whether it is earning

sufficient profit to cover administration and marketing expenses and is able to cover its
fixed expenses. The gross profit ratio of current year is compared to previous years ratios
or it is compared with the ratios of the other concerns. The minor change in the ratio from
year to year may be ignored but in case there is big change, it must be investigated. This
investigation will be helpful to know about any departure from the standard mark-up and
would indicate losses on account of theft, damage, bad stock system, bad sales policies
and other such reasons.

P a g e | 66

6. Net Profit Ratio

This ratio measures the relationship between net profit and net sales.
Objectives:
To determine the overall profitability due to various factors such as operational
efficiency, trading on equity, etc.
Net profit ratio:
Net profit * 100
Net sales
Net Profit
Net Sales

2008-09
5,064
62,002

2009-10
5,539
70,279

2010-11
3,274
94,117

2011-12
6,836
1,22,202

2012-13
10,801
1,58,863

In order to work out overall efficiency of the concern Net Profit ratio is calculated. This
ratio is helpful to determine the operational ability of the concern. While comparing the
ratio to previous years ratios, the increment shows the efficiency of the concern.

P a g e | 67

Interpretation:It shows wheather organization earning sufficient or not and it

helps to share holders for make decision about investing capital on the
organization.

P a g e | 68

Finding

P a g e | 69

Top 5 Factors Affecting Exchange Rates

Exchange rates change by the second. Understand the dynamics that affect them.
Currency changes affect you, whether you are actively trading in the foreign exchange
market, planning your next vacation, shopping online for goods from another country
or just buying food and staples imported from abroad.
Like any commodity, the value of a currency rises and falls in response to the forces of
supply and demand. Everyone needs to spend, and consumer spending directly affects the
money supply (and vice versa). The supply and demand of a countrys money is reflected
in its foreign exchange rate.
When a countrys economy falters, consumer spending declines and trading sentiment for
its currency turns sour, leading to a decline in that countrys currency against other
currencies with stronger economies. On the other hand, a booming economy will lift the
value of its currency, if there is no government intervention to restrain it.
Consumer spending is influenced by a number of factors: the price of goods and services
(inflation), employment, interest rates, government initiatives, and so on. Here are some
economic factors you can follow to identify economic trends and their effect on
currencies.
Practice currency trading
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100,000 units of virtual money and never expires.
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U.S. dollar strength
Read market commentary on how the U.S. dollar will perform against the euro and

P a g e | 70

other major currencies based on these top 5 factors.

U.S. dollar quarterly strength table

1. Interest Rates
"Benchmark" interest rates from central banks influence the retail rates financial
institutions charge customers to borrow money. For instance, if the economy is underperforming, central banks may lower interest rates to make it cheaper to borrow; this
often boosts consumer spending, which may help expand the economy. To slow the rate
of inflation in an overheated economy, central banks raise the benchmark so borrowing is
more expensive.
Interest rates are of particular concern to investors seeking a balance between yield
returns and safety of funds. When interest rates go up, so do yields for assets
denominated in that currency; this leads to increased demand by investors and causes an
increase in the value of the currency in question. If interest rates go down, this may lead
to a flight from that currency to another.
Official economic figures
Access more than 150 economic figures from the world's major markets. Latest figures
are graphed against years of previous economic data.

2. Employment Outlook

P a g e | 71

Employment levels have an immediate impact on economic growth. As unemployment

increases, consumer spending falls because jobless workers have less money to spend on
non-essentials. Those still employed worry for the future and also tend to reduce
spending and save more of their income.
An increase in unemployment signals a slowdown in the economy and possible
devaluation of a country's currency because of declining confidence and lower demand. If
demand continues to decline, the currency supply builds and further exchange rate
depreciation is likely. One of the most anticipated employment reports is the U.S. NonFarm Payroll (NFP), a reliable indicator of U.S. employment issued the first Friday of
every month.
3. Economic Growth Expectations
To meet the needs of a growing population, an economy must expand. However, if
growth occurs too rapidly, price increases will outpace wage advances so that even if
workers earn more on average, their actual buying power decreases. Most countries target
economic growth at a rate of about 2% per year. With higher growth comes higher
inflation, and in this situation central banks typically raise interest rates to increase the
cost of borrowing in an attempt to slow spending within the economy. A change in
interest rates may signal a change in currency rates.Deflation is the opposite of inflation;
it occurs during times of recession and is a sign of economic stagnation. Central banks
often lower interest rates to boost consumer spending in hopes of reversing this trend.

4. Trade Balance

P a g e | 72

A country's balance of trade is the total value of its exports, minus the total value of its
imports. If this number is positive, the country is said to have a favorable balance of
trade. If the difference is negative, the country has a trade gap, or trade deficit.
Trade balance impacts supply and demand for a currency. When a country has a trade
surplus, demand for its currency increases because foreign buyers must exchange more of
their home currency in order to buy its goods. A trade deficit, on the other hand, increases
the supply of a countrys currency and could lead to devaluation if supply greatly exceeds
demand.
5. Central Bank Actions
With interest rates in several major economies already very low (and set to stay that way
for the time being), central bank and government officials are now resorting to other, less
commonly used measures to directly intervene in the market and influence economic
growth.
For example, quantitative easing is being used to increase the money supply within an
economy. It involves the purchase of government bonds and other assets from financial
institutions to provide the banking system with additional liquidity. Quantitative easing is
considered a last resort when the more typical responselowering interest ratesfails to
boost the economy. It comes with some risk: increasing the supply of a currency could
result in a devaluation of the currency.

P a g e | 73

LIMITATION

P a g e | 74

Theyre on Face book, but..

They
dont
allow
users
to
comment
on
their
content.
They dont allow users to share their content as like their working capital data. So that
inveteracy not take proper decision to be share holder of that organization. The
Pharmaceutical industries use of gifts to physicians for more sales and less capital
investment.
The grouping of different items in the balance sheet also created hindrances for
us, as it is very difficult to identify which item is clubbed with which head. But
thanks to the accounts personnel who made it easy to understand these
clubbing.
Another limitation is the un audited statements, which lead to difference in
the information of annual reports and monthly statements
Nearly 70% of Indian population is residing in rural India. However, the
modern pharmaceutical products, newer drugs, technology are yet to reach this
vast sector. So its affect to organizations financial situation or capital
investment.

P a g e | 75

SUGGESTION

P a g e | 76

They have to give proper information about their financial position or working
capital requirement for influencing to invest money to share holders.
As we are market leaders in our product and though the number of competitors are
high, we can ask for early payments because of our consistent high quality of
products. Thus reducing the investments in receivables
For the capital investment in pharmaceutical business, the marketing staff needs
good communication skills. ( Corporate common)
There is stiff competition in pharmaceutical business accordingly every
pharmaceutical company has to spend more on advertisements and sales
promotion expenses. To minimize this company can go for brand building & CSR
activities..
Total Quality Management concept in Pharmaceutical Industry will help survive
pharmaceutical companies in todays competition. Hence the company should
internalize TQM & Six sigma process.

P a g e | 77

CONCLUSION

P a g e | 78

The training at Cadila Pharmaceutical Limited Was memorable experience I am

fortunate to get opportunity to know about the working and functioning of the
company. The management had a positive attitude towards us and they tried best
to provide me with proper guidance and completed information. I show each and
every unit completely. The unit people were very heritable and this encouraged
working.
The supervisor unit co-ordination is simply versatile which a result of bright future
is there co-ordinate between workers and staff. The future is clear of the unit
because of its effective management.
Increasing turnover and high quality of its products so after observing such
matters. I can say that the company has best delight, bright future for coming
years.

P a g e | 79

Bibliography

P a g e | 80

Websites

(1) Http:// www.Cadila Phrema.com

(2) Http:// www.banknetindia.com/banking/metlend.htm.
(3) Http://www,Google.co.in.

REFERENCES
1. Projects, preparation, appraisal, budgeting and implementation by
Prasanna Chandra.
2. Financial Management by I.M.Pandey.
3. Research Methodology by C.K.Kothari.
4. Research Methodology by Dr. Mahesh Kulkarni

WEBLINKS
1.
2.
3.
4.
5.
6.

www.justdial.com
www.yellopages.com
www.google.com
www.wikipedia.org
www.askme.com
www.yahooanswers.com

P a g e | 81

ANNEXURE

P a g e | 82

ASSESSMENT OF WORKING CAPITAL REQUIREMENTS

FORM II
OPERATING STATEMENT
Sr.

(Rs. In Lacks)
200 200 2010- 2011 2012

Particular

No.

01

Gross Sales
a.
b.

02.
03

8-

9-

11

-12

-13

09
Act

10
Act

Provi

Proj

Proj

ual

ual

siona ecte

ecte

69,

Domestic Sales

59,

Export Sales

670 168 5
709
3,2 1,7 5,755 4,98

Total

88
62,

78
70,

90,16 1,19, 1,55,

957 946 0
696
955 667 1,803 2,49

Less : Excise duty

Net Sales (1 - 2)

62,

70,

621
6,48

8
4
95,92 1,24, 1,62,

94,11

002 279 7
04.

105
3,24

4
2
1,22, 1,58,
202

863

% age rise (+) or fall (-) in net sales as compared to previous -

13.

33.92 29.8

30.0

year (annualized)

35

0%

4%

%
Cost of Sales
5

Raw materials (including stores & 30,

38,

51,76 67,2

other items used in the process of 720 279 4

mfg.)
A
B

15,

11

87,3
75

Imported

12,

20,70 26,8

34,9

Indigenous

073 338 6
85
18, 22, 31,05 40,3

50
52,4

647 940 9

25

27

P a g e | 83

ii.

iii.

07.

Imported
Indigenous

163
163
639

157
157
667

141
141
847

183
183
1,10

238
238
1,43
0
23,8

iv.

Direct Labour ( wages

w8,

9,4

0
12,23 18,3

v.

& Salary)
Other manufacturing

658 37
1,8 1,8

5
30
1,882 2,44

29
3,17

vi.

expenses
Depreciation

10
1,1

18
1,6

4
2,385 2,38

7
2,38

vii.

Sub-total (i to v)

52
43,

77
52,

5
69,25 91,6

5
1,18,

viii.

Add : Opening Stock-

142 034 6
54
494 344 1,154 1,30

435
1,75

viii.

in-process
Sub-total (vii + viii)

43,

0
70,40 92,9

0
1,20,

ix.

Deduct

636 378 9
54
344 1,1 1,300 1,75

185
2,25

x.

Stock-in-process
Cost of Production

43,

Add : Op. Stock of

292 224 9
6,5 7,2 11,62

04
10,7

935
13,5

finished goods

35

54

30

00

Sub-total (x + xi)

49,

58,

80,73 1,01, 1,31,

xii.

Deduct : Cl. Stock of

827 478 1
934
7,2 11, 10,73 13,5

435
17,4

xiii.

finished goods
Sub-total (Total Cost

54
42,

50
1,13,

of Sales)
Selling, general and

573 857 1
9,5 10, 14,11

34
18,3

985
23,8

administrative

98

896 8

30

29

expenses
Sub-total ( 5 + 6)

52,

57,

1,06, 1,37,

xi.

06.

Other Spares
A
B
Power and Fuel

Closing

52,

54
51,

0
69,10 91,2

622 0
00
46, 70,00 88,4

84,11

0
1,17,

P a g e | 84

171 753 8
765
9,8 12, 9,999 15,4

814
21,0

31
3,7

526
38
5,0 6,043 5,09

49
3,85

Interest on Term Loan

39
1,5

78
1,6

7
4,543 3,29

1
2,05

Interest of W. C. Loan

91
2,1

48
3,4

7
1,500 1,80

1
1,80

48
6,0

30
7,4

0
3,956 10,3

0
17,1

92

48

08.

Operating

Profit

09.

Before Interest ( 3 - 6)
Interest & Financial Charges

10.

Operating Profit After

11.

Interest ( 8-9 )
i.

41

98

Add : Other nonoperating Income

A

Profit

on 15

Sale

of

B
C

assets
Dividend
Interest

166 4
125
244 173 450

300

300

income
Misc.

389 586 925

750

500

814 763 1,500 1,05

800

Income
Sub - total (income)

0
ii.

Deduct : Other nonoperating expenses

C

Exchange

147 476

rate
D

difference
Misc.

Expenses
Loss on sale -

900 1,2
46
22

of Assets
Sub - total (expenses)

1,0

1,7

47

43

P a g e | 85

iii.

Net of other non-

(23

(98

operating

3)

0)
6,4

1,500 1,05

800

income/expenses
11.

Profit before tax/loss

5,8

5,456 11,3

17,9

12.

[ 9 + 10 (iii)]
Provisions for taxes

59 68
91
795 929 2,182 4,55

98
7,19

5
3,274 6,83

7
10,8

13.
14.

Net Profit / Loss

5,0

a.
b.

64 39
552 29 0%

Equity dividend
Dividend
(Including

tax

Rate
on

5,5

0%

6
0%

01
0%

dividend)
16.

Retained Profit ( 13

4,5

5,5

3,274 6,83

10,8

17.

-14 )
Retained Profit / Net

13
89

39
6
100 100% 100

01
100

Profit